US-China Trade War... Will Other Asian Countries Benefit?

Several American companies are intending to withdraw its production from China due to the aggravated trade war between the US and Beijing. US President Donald Trump’s threat of slashing an increased tariff on China imports has triggered the trade fight between the two countries. Trump has already imposed a 25 percent tariff on $200 billion worth Chinese goods, and has further threatened to slash on another $325 billion worth goods which fueled the prolonged conflict.

The American Chambers of Commerce in China has already reported that about 41 percent of multinational companies such as Apple, Dell, HP and even some Chinese companies TCL, GoerTek are considering alternate options to move their production out of China. This has pulled down the China’s exports in the US market by 8.1 percent to $199 billion in first half of 2019, states the National Bureau of Statistics. With this the country’s economy growth also has been majorly affected; it reports 6.2 percent in the second quarter of the year, and its government considers this as a weakest in past 27 years. On the contrary, it is not very feasible for the companies as well to just shift their manufacturing base to other countries, especially when it comes to the quality of the product.

China’s Coherence over other Asian Countries

China has widely attracted numerous multinational clients and evolved as their production base. The lower production charges and cheaper labor are the two vital reasons for China to top the list of manufacturers. The manufacturing charges in the country are significantly lower as compared to other country’s domestic manufacturing charges, which makes the companies opt for China for their production. The massive population of China enables it to provide the cheaper labour, which in turn cuts down the infrastructure expenses as well. In addition to this, China also excels in high production capabilities and prompt services which drag the MNCs towards it.

Though India is in par with China in Asian market, it falls short as China gathers ten times more FDIs and holds a rapid economic growth as compared to India. Vietnam also offers cheaper labor cost but its 100 million population is way too less in comparison with China’s 1.3 billion. Despite India having enormous manpower, it lacks in skills, and the government imposed restrictions on the foreign investments also pose an obstacle and prevent the nation from attracting investors.

Measures to Attract More Manufacturing Units

It is the right time for all the other Asian countries to woo the companies who are looking to shift their manufacturing unit out from China. Vietnam and Malaysia would be greatly benefited by this move; it seems like India has missed the investment reaps. The Trade Ministry intends to cut reliance on import and foster the exports, but it awaits the Finance Minister’s approval. Further, India is intending to offer incentives to these companies’ manufacturing units, the industries eligible for the incentives would be electronics, consumer appliances, electrical vehicles and toys. It is to see whether the other Asian countries grab the opportunity or trade war rival would call for truce.